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Are cashback credit cards worth it?

You can easily earn cash back on everyday purchases without juggling points and math.

A cashback credit card is almost always worth a spot in your wallet if you’re not paying an annual fee to use it. You can think of it as a way to earn free cash back on the items you’d typically purchase anyway. The bigger question then is how to choose a cashback card and whether you could better benefit from a different kind of credit card, such as a travel card. Here’s how to know if a cashback credit card should be the next card to add to your wallet.

Should I get a cashback credit card?

To find out whether cashback credit cards are the right choice for you, ask yourself a few questions about your spending habits and financial needs:

  1. Do you want simple cash back or a bigger rewards structure?

    Cashback credit cards are the simplest way to earn for your credit card spending. In most cases, the cash back you earn is deposited to your account as a statement credit automatically — no muss, no fuss. A rewards card on the other hand earns points, which you can use a on wider variety of redemption options. These cards are a bit more complex to earn and redeem with, but may offer additional value over a cashback card.

  2. Do you want rewards but also want to avoid annual fees?

    Many cashback credit cards have no annual fee. There are some cashback cards that feature annual fees, but these are rare and usually have additional perks on top of the cash back opportunity.

  3. Do you need a 0% intro APR period?

    Some cashback credit cards offer a 0% intro APR period on purchases. However, you’re not necessarily going to find the longest intro APR available on cashback cards, and you’re even less likely to find a cashback card with a 0% intro APR on balance transfers. If you need a credit card to fulfill a specific purpose, such as consolidating and paying off existing debt, you may want to prioritize that feature over cash back.

Who shouldn’t get a cashback credit card

In some situations, cashback credit cards may not be the most prudent choice. To find out whether a cashback card would be a poor choice for your situation, ask yourself:

  1. Heavy travelers

    If you travel often, you’ll likely get more value out of a dedicated travel rewards card. That’s because with a solid travel card you can earn up to 5x points on travel purchases which you can then redeem for airfare, hotel stays, car rentals or cruises. What’s more, you may get additional perks like free checked bags, airport lounge access, TSA PreCheck or Global Entry fee credit and more. Cashback cards may also cost you extra to use abroad: many cashback credit cards charge foreign transaction fees of up to 3% of the amount of every transaction. This means a $5,000 spend abroad will cost you an additional $150 in fees.

  2. The big reward players

    Most cashback cards earn around 1.5% to 2% back on average. But rewards cards regularly earn 3% back on common categories and can reach as high as 5% back during certain times of the year. The tradeoff is maximizing those higher earning rates takes some proper planning and spending throughout the year. If you’re looking for a credit card that’s more “fire and forget,” a cashback card is often the better choice.

  3. Those who need to pay off debt

    If you’re more concerned with paying off existing debt rather than earning rewards, a card with a long 0% intro APR period on balance transfers would be your best choice. There are cashback cards that offer long 0% intro APR period, but the cards with the longest intro APR period typically have no rewards program.

What are the pros and cons of cashback credit cards?

Cashback credit cards can be an excellent financial tool, but there are also some drawbacks you need to consider.

ProsCons
  • High rewards rate.
    Earn 6% cash back when you use some credit card on select categories, such as purchases made at US supermarkets or US streaming services. You can also find a lot of cashback cards with 5% back on rotating categories.
  • Variety of cashback categories.
    Earn accelerated rewards on almost every category of purchases, including groceries, gas, dining, online purchases and streaming services.
  • Simple rewards structure.
    Enjoy a simple rewards structure that doesn’t require you to calculate how many points each redemption option requires; You always know how much you get from your purchases.
  • Signup bonus.
    Earn a decent signup bonus with most cashback cards once you meet certain spend requirements. Depending on the card, the bonus can be up to $300.
  • No annual fee.
    Pay a $0 annual fee for most cashback credit cards. Of course, there are exceptions, but it’s unlikely that you’ll find a cashback card with a higher annual fee than $99.
  • High APR.
    Watch out for high APR that applies after your intro APR period ends. To make the most of your card’s rewards, pay your balance in full before it’s due.
  • Foreign transaction fees.
    Pay foreign transaction fees between 1% and 3% on all purchases made abroad or online with foreign merchants. This makes cashback cards poor international traveling companions compared to dedicated travel cards.
  • Cashback limitations.
    Watch out for cashback caps as some cashback cards that offer high reward rates limit the amount of cash back you can earn. For example, you can earn 5% cash back on select categories on up to $2,500 in a quarter. After that, your rate reverts to 1%.

What can I earn cash back on?

Cashback credit cards largely come in three flavors: a card that can earn you 1.5% or 2% back on all purchases, or a card that can earn higher than that, but only on either select rotating categories or up to a certain reward threshold. Some categories you can expect include:

  • Groceries
  • Dining
  • Gas
  • Entertainment
  • Online purchases
  • Streaming services
  • Department store purchases
  • Home improvements purchases
  • Drugstore purchases
  • Travel

Most credit cards let you earn cash back on multiple categories. But if you can’t pinpoint an exact category where you spend most of your money, consider a cashback credit card with unlimited cash back on all purchases. You can typically redeem your cash back as a statement credit or a deposit to your eligible account. Depending on the card, you could also get other redemption options such as gift cards or merchandise.

Compare cashback credit cards

Select up to 4 cashback credit cards to start comparing their features side-by-side.

Name Product Welcome offer Rewards Annual fee Filter values
Blue Cash Preferred® Card from American Express
20% back on Amazon.com purchases in the first 6 months for up to $200 back, plus $150 statement credit after you spend $3,000 in the first 6 months
6% on select US streaming services, 3% on transit and US gas stations, 6% at US supermarkets on up to $6,000 annually, then 1% after that and on all other purchases (redeem as statement credit)
$0 intro annual fee for the first year ($95 thereafter)
Perfect for families: Earn up to 6% cashback as statement credit on everyday purchases and a big welcome offer for a cashback card. This heavy-hitter rewards card has uncontested value. Terms apply, see rates & fees
Blue Cash Everyday® Card from American Express
20% back on Amazon.com purchases in the first 6 months for up to $150 back, plus $100 statement credit after spending $2,000 within the first 6 months
2% at US gas stations and select US department stores, 3% at US supermarkets on up to $6,000 per year, then 1% after that and on all other purchases (redeem as statement credit)
$0
This everyday cashback card offers a higher than average welcome offer for no annual fee, letting you earn 20% back on Amazon.com purchases in the first 6 months for up to $150 back, plus $100 after you spend $2,000 in the first 6 months. Terms apply, see rates & fees
Chase Freedom Unlimited®
$200 after spending $500 in the first 3 months
5% cash back on travel purchased through Chase, 5% on Lyft, 3% on dining and drugstores and 1.5% on all other purchases
$0
This solid 1.5% cashback card gets even better with the addition of up to 5% back in categories like travel, drug stores and dining.
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Compare up to 4 providers

How to maximize your cash back

  • Spend enough to earn the signup bonus. You may need to make purchases more aggressively to reach the spending requirement by the bonus’s expiration date. The clock starts ticking the day you open your account, which may be a few days before you receive your card in the mail. If your credit limit isn’t high enough, you may have to pay off your balance a few times to make room for additional spending.
  • Sign up for special categories in advance. If you choose a rotating-bonus-category cashback card, you may need to activate your categories before you earn elevated rewards. If you forget to activate these categories each quarter, you’ll make just 1% on those purchases instead of the advertised rate.
  • Combine cashback cards. If you won’t earn elevated rewards for certain purchases with a certain card, consider using a different cashback card that does earn elevated rewards.
  • Pay your balance in full each month. Paying interest on a cashback credit card eats into your rewards. You can avoid interest as well as late fees by setting up automatic payments for your full statement balance each month.
  • Use your credit card for purchases only. Cash advances and balance transfers don’t earn rewards. In addition, they usually start accruing interest immediately and often carry hefty fees to perform.
  • Choose a card with an intro APR. Some cashback credit cards also come with 0% APR offers. These can help you save on interest on existing debt or new purchases, which is a great value add on top of the card’s long term value.

Cash back earnings example

Here’s how your earnings could pan out after one month of spending using the Citi® Double Cash Card and Chase Freedom Flex℠ as examples.

Flat-rate: Citi® Double Cash Card

The Citi® Double Cash Card earns 2% cash back in total: 1% on your purchase and another 1% back when you pay off your balance. Here’s how that would pan out given some example spending.

PurchasesAmount spentCash back earned
Groceries$400$4
Gas$100$1
Travel$300$3
Total$800$8
Total when you pay your balance (an additional 1%)$16

Categories: Chase Freedom Flex℠

Unlike the Citi® Double Cash Card, the Chase Freedom Flex℠ can earn up to 5% cash back on eligible purchases. However, the categories eligible to earn 5% on a quarterly basis need to be activated and you can only earn this rate on up to a $1,500 spending cap. After that, you’ll earn 1% in that quarter’s category.

Outside of these bonus categories, you earn 5% cash back on travel through Chase Ultimate Rewards and on Lyft through March 2022, 3% back at restaurants and drugstores and 1% back on everything else. As of this writing, the card’s quarterly bonus categories included gas stations, internet, cable and phone services, and select streaming services.

PurchasesAmount spentCash back earned
Groceries$400$20
Gas$100$5
Travel$300$15
Total$800$40

Bottom line

If you use credit cards, you should strive to have at least one cashback credit card in your wallet. It’s a simple, hassle-free way of adding value to your everyday purchases.

If you’re not sure whether cashback cards are the right choice for you, compare rewards credit cards until you find the right type of credit card for your needs.

Frequently asked questions

  • Is there a minimum redemption threshold?
    It depends on the card — some cards have no redemption threshold, while others have a $25 minimum.
  • Do cashback credit cards build credit?
    Yes, so long as the card provider reports your card activity to the three credit bureaus — Experian, Equifax and TransUnion.

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